Critical Elements and the rising demand of lithium

Critical Elements Corporation (TSXV: CRE | OTCQX: CRECF | FSE: F12), has developed a compelling narrative to rebut the equity market’s reluctance to support the mining sector, an enviable state of being that is highly sought after among junior minors in this time of financial strife.

The company is a Canadian mining exploration company, which began drilling the Rose property, located in the northeast part of the Archean Superior Province of the Canadian Shield craton, in late 2009. Mineralization recognized to date on the Rose property has revealed the presence of Lithium along with other rare earth elements such as Cesium, Tantalum or LCT-type pegmatites and molybdenum occurrences.

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First, the company has built a two-step approach to cash flowing operation soon after beginning of operations of Rose Tantalum-Lithium project in James Bay. CEO, Jean-Sebastien Lavallee, “We’re negotiating globally with users of concentrated spodumene and tantalum from our first stage flotation plant, this will permit us to generate cashflow early on and will permit us to raise finances for our purification plant for the project of lithium carbonate.“

Second, the Rose project has an outstanding financial profile. The project capex and rates of return are appealing and warrants the attention of investors: A recent financial analysis of the Rose Project based on price forecasts of US$260/kg ($118/lb) for Ta2O5 contained in a tantalite concentrate and US$6,000/t for lithium carbonate (Li2CO3) show an after-tax Internal Rate of Return (IRR) of an estimated 25% for the Rose Project, with an estimated Net Present Value (NPV) of CA$279 million at an 8% discount rate. The payback period is estimated at 4.1 years. The pre-tax IRR is estimated at 33% and the NPV at $488 million at a discount rate of 8%.

Third, its mineralogy is understood and has been the object of commercial production elsewhere in Canada (Manitoba). It consists of 26,500,000 tonnes of indicated resources containing 1.30% Li2O Equivalent (Eq) or 0.98% Li2O (259,700 tonnes of Li2O or 642,238 tonnes of Li2CO3 Eq), 163 ppm of Ta2O5 (9,514,317 pounds of Ta2O5) and 10,700,000 tonnes of inferred resources containing 1.14% Li2O Equivalent (Eq) or 0.86% Li2O (92,020 tonnes of Li2O or 227,565 tonnes of Li2CO3 Eq), 145 ppm Ta2O5 (3,417,400 pounds of Ta2O5). The resource was compiled using a cut-off grade of 41$/t for the open pit model and $66/t for the underground model (taking Li and Ta recovery into consideration) based on the current estimation of the resource and market conditions.

Fourth, it is emerging at a time when lithium demand is about to increase significantly, thanks to the emergence of lithium-grabbing projects such as Tesla’s planned $5 billion lithium ion battery plant in Nevada which is expected to create a significant demand for lithium. Because of such initiatives many forecast a shortage in lithium.

Fifth, Critical Elements has been at this project since 2009, permitting it to understand the lay of the land, the stakeholders and the market. For example, hydrometallurgical testing has determined that the developed process can safely produce lithium carbonate with an overall recovery rate up to 96%. The overall purity gave values up to 99.98%, which surpasses the requirements of battery grade lithium carbonate.

The results of such testing may be even more motivating because lithium hydroxide, and not lithium carbonate, is currently lacking the lithium chemical necessary for battery manufacturing. The reason for this shortage is that lithium brine deposits naturally contain much more lithium carbonate than lithium hydroxide and brine deposits, which are currently the most significant sources for lithium. Critical Elements Corporation’s exciting find may therefore enable the rapid production of the Rose project and the subsequent exploitation of a new and vital source of lithium in North America.